How to Get Business Funding
Getting a business off the ground takes capital. If you have a solid plan for a business, but you need some cash, you have several options for funding. Explore your options to find the business funding source that fits your needs.
Overview of Business Funding
Business funding can be necessary when you start a business, or you might need to tap into extra funds to expand your company. Finding the funds for a company can be challenging, especially with lending standards becoming more stringent. It may be tempting to max out a credit card to pay business expenses. However, this comes with some personal risk if you have trouble paying the balance, and you are forced to pay high-interest payments.
Government Business Funding
The United States Small Business Administration (SBA) guarantees loans for small business owners. To qualify for this funding, you first need to apply for a loan on your own unsuccessfully. After you’ve been denied, you can turn to the SBA. You’ll need to qualify as a small business, meeting all criteria for the loan. Then, you can apply for a commercial loan from a lender that processes SBA loans.
Business Funding Partners
Business funding partners are individual investors who are looking for startup companies for investing. This type of funding is usually not a loan. Instead, investors give capital in return for partial ownership of the company. A potential investor will want to explore your business plan to make sure it’s solid, and you’ll need to furnish full information about your company, including your products and services, team, market analysis and financial statements. The investor will want a set of terms for the funding, and you’ll need to sign an agreement. Some investors want to be actively involved in a company, but others may observe from the sidelines.
Kickstarter Business Funding
Kickstarter business funding is also known as crowdfunding. You approach potential crowdfunders to find people who are interested in contributing funds. These individuals won’t expect financial return because they don’t receive a share of the business. Usually, business owners will give contributors a gift, often the service or product sold by the company. A benefit of this funding is the retention of control of the company. Even if a business doesn’t succeed, you have no obligation to the contributors.
Some business owners prefer to go the self-funding route to get a business off the ground. You might tap into a 401(k) or use your savings to fund your business. You could also approach friends and family for a loan. The benefit of these self-funding routes is that you retain full control of your business without having to hand over some aspects of the company to other people. On the downside, if your business doesn’t succeed, you may run into problems with your retirement account, or you could sacrifice your savings.